How Renovating Your Home Could Raise or Lower Your Insurance Premiums
It's rare to buy a home that is truly "move-in ready." While the property may have all of the essentials for immediate occupancy, you might want to undertake at least some renovating. Whether it's remodeling the kitchen or replacing doors and windows, renovations can expand floor space and increase your enjoyment of your home, especially if it’s a smaller or older property.
Improvements can also boost the value of your home. However, they can also affect your homeowners insurance. In some cases, the changes to the property could cause your premiums to increase, but it's also possible for some upgrades to result in savings.
5 home improvements that can change your insurance costs
How a home improvement project affects your insurance premiums depends on the work you complete. In general, projects that increase your home's value or square footage will cause your home insurance premiums to increase to cover the higher value of the property. By contrast, preventive measures, such as hurricane shutters or a home security system, can help you save money since they reduce the risk of damage.
Here's what to expect to happen with your insurance coverage or its cost when you complete these five common projects.
1. Replacing a roof
The National Association of Realtors (NAR) reported that replacing a roof is one of the most common projects for homeowners, and it's also one of the best renovations in terms of return on investment. The NAR found that homeowners typically recover 100% of the roof's cost when they sell the property.
There are some other perks, too. Depending on your location and insurance company, replacing your home's roof could help you save money on homeowners insurance.
Renovation cost: About $9,500 on average, according to home improvement site Angi, with a typical range of between $6,000 and $13,000. Of course, the size, complexity and materials of the roof could change this range.
2. Remodeling the kitchen
Whether it's gutting the entire room or merely updating the countertops, remodeling a kitchen is a project that can change the experience of living in your home. In the NAR's study, homeowners who completed a total kitchen remodel reported high levels of satisfaction with their property.
Remodeling a kitchen can also substantially increase your home's value. While that can be a good thing, you should be aware that your premiums may increase to compensate for the higher replacement cost for your property.
Renovation cost: $20,000 to $60,000 for a full kitchen remodel, according to JSB Home Solutions, which adds that budgeting between 5% and 15% of the home’s value is often recommended.
3. Installing a pool
Building a swimming pool can allow you to enjoy the outdoors more often and improve your home's resale value. However, it can also cause an increase to your insurance premiums – and not only because the pool boosts the value of the property.
As a pool owner, you're at an increased liability risk if someone is injured in your pool. In addition, swimming pools are prone to damage from weather-related incidents. For example, a fallen tree can damage the pool's surface and mechanicals. As a result, your premiums could increase after you install a pool.
Renovation cost: An average of about $40,000 for an above-ground pool, according to data from home improvement site Angi. An in-ground pool could easily cost 50% more.
4. Finishing an attic or basement
Upgrading an attic or basement to make it more habitable can give you some much-needed extra living space. For example, you might add a bedroom to give a child their own room, or install an additional recreation space. A finished basement or attic can improve your home's resale value (and make it easier to sell!), but it could also increase your homeowners insurance premiums.
With more living space, you'll need increased dwelling coverage for the property, so your rates may rise. Renovation cost: $30,000 or so is typical to finish a basement, according to home improvement site Angi. Many attics cost far less than that to finish, although there are exceptions.
5. Replacing old doors or windows
If you notice drafts or cracks around your doors or windows, replacing them can lower your energy costs, keep you more comfortable inside your home and limit water damage. But, there's another perk: It can also help you save money on homeowners insurance.
The reason relates to the home’s weather readiness. If you replace your windows or doors with wind-resistant or hurricane versions, you improve your home's safety and stability, and reduce the risk of wind damage. Consequently, your insurer may give you a discount on your premiums.
Renovation cost: $300 and up per impact-resistant window, $1,000 or so per hurricane-resistant door.
Assessing the insurance impact of a home improvement
Since home renovations may result in higher premiums, it's a good idea to follow these steps so you can best plan how the changes you make will affect the cost of your policy:
- Contact your insurer: Review your planned renovations in advance with your representative to ensure you have the right coverage, including the needed liability coverage — which might have changed in light of updates to the property. In some cases, you may need to add coverage, such as increasing your dwelling coverage or adding extra coverage for other structures on the property.
- Keep records: As you get underway on your project, keep track of relevant contracts, permits, expenses and invoices. It's also a good idea to take before-and-after pictures in case your insurance provider has questions about the project and its impact on your home's value. In the event you subsequently need to file a claim, these records can be invaluable in helping you get the reimbursement you deserve.
- Review your coverage: Even after your project is complete, get in the habit of reviewing your insurance policy at least once a year. Make sure your coverage limits still provide adequate protection for your home and other assets.
This story was created in partnership with Money.com.
Your Policy, Policy Declarations or Amended Declarations in effect on the date of loss is the primary source of reference for your coverage, coverage limits and deductible amounts.
This inclusion of non-Amica companies, products, services or statement herein (“Third-Party Content”) is for general informational purposes only and does not constitute a recommendation or endorsement by Amica Insurance. Policies, views, opinions or positions of Third-Party Content expressed herein are those of the authors and do not necessarily reflect the policies, views, opinions or positions of Amica Insurance. Amica Insurance makes no warranties, expressed or implied, as to the accuracy and reliability of Third-Party Content.
This content may contain helpful tips, explanation and advice. Your use of this information is voluntary and may not be effective in every circumstance. Amica encourages you to use good judgement and put safety first.
For more information on our editorial process and content standard, take a look at our editorial guidelines.
AMIC-01-051225